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2017 (9) TMI 1167 - AT - Income TaxDisallowance of Proportionate Compensation Paid for mining activity - nature of expenditure - revenue or capital - Held that:- We find that the issue under dispute is squarely covered by the decision of this tribunal in assessee’s own case for the Asst Year 2006-07 wherein held the payment of compensation to persons whose rights are infringed by the mining activity is revenue in nature. - Decided in favour of assessee. Disallowance u/s 14A - whether only investments from which exempt income was received should be considered - Held that:- We deem it fit and appropriate to remand this issue to the file of the ld AO with the direction to consider all investments (excluding investments in subsidiary companies) which yielded dividend income to the assessee for computing disallowance u/s 14A of the Act r.w. Rule 8D of the Rules. Accordingly the grounds raised in this regard are partly allowed for statistical purposes. Taxability of Industrial Promotion Assistance - capital v/s revenue receipt - Held that:- It is apparent from the provisions of the 2000 Scheme and the certificate of registration and eligibility certificate that the assistance was to be made available after the commencement of commercial production without any financial cap and was to be adjusted against the sales tax liability of the year of claim. The industrial promotion assistance was clearly not used directly or indirectly to acquire the assets nor any part of the cost of the assets was met directly or indirectly from the industrial promotion assistance. We find that the issue under dispute is squarely covered by the decision of this tribunal in assessee’s own case for Asst Year 2007-08 wherein held IPA received by the assessee would have to be construed as a Capital Receipt and the same need not be reduced from the cost of assets in terms of Explanation 10 to Section 43(1) of the Act. Accordingly, the grounds raised by the revenue are dismissed and grounds raised by the assessee are allowed. Adopting of price for working out the amount eligible for deduction u/s 80IA - Held that:- We find that during the previous year relevant to the Asst Year 2009-10, the assessee infact sold electricity at rates higher than that charged from it by the State Electricity Board. The assessee nevertheless made the computation for the purpose of section 80IA of the Act with reference to the price charged from it by the State Electricity Board. In such circumstances, we hold that, when it was permissible for the assessee to sell electricity to consumers and distribution licensees at rates higher than that paid by it to the State Electricity Board, the price charged by the State Electricity Board would be a very good indication of the market value of electricity and the assessee did not commit any error in adopting such price for working out the amount eligible for deduction u/s 80IA of the Act. We find that the method adopted by the assessee viz. to take the average rate charged by the State Electricity Board for the previous month is quite appropriate and reasonable for determining the market value for the month of supply. The annual weighted average adopted by the ld CITA would result in variations occurring during the year at different times being made applicable uniformly for the whole year. In our considered opinion, the assessee’s method is more appropriate as it factors in variations as and when they take place. Coming to the decision of the ld CIT-A to exclude electricity duty and cess, we find that the same has been addressed by the Hon’ble Gujarat High court in the case of CIT vs Shah Alloys Ltd [2011 (11) TMI 762 - GUJARAT HIGH COURT] held that the price charged by the Electricity Board inclusive of the amount of Electricity Duty represented the market value even though the assessee was not required to charge electricity duty. We direct the ld AO to accordingly modify the earlier years profits also Treatment of Interest Subsidy - Held that:- Respectfully following the said decision of the Hon’ble Supreme Court in Balaji Alloys [2011 (1) TMI 394 - Jammu and Kashmir High Court] we hold that the interest subsidy is to be treated only as a capital receipt and accordingly the grounds raised by the assessee in this regard are allowed. Allowability of Initial Depreciation (balance 50%) on additions made in earlier years - Held that:- As decided in Hindustan Gum & Chemicals Ltd. Versus DCIT [2017 (3) TMI 1173 - ITAT KOLKATA] the assessee is entitled for remaining portion of additional depreciation in the asst years 2008-09 and 2009-10 and accordingly the grounds raised by the assessee in this regard are allowed. Exclusion of unabsorbed depreciation of earlier years before the 1st year of claim of deduction u/s 80IA - Held that:- We find that the CBDT had clearly issued a Circular No. 1/2016 dated 15.2.2016 explaining the meaning of ‘Initial Assessment Year’ in the light of decisions rendered by the Hon’ble Madras High Court in the case of Velayudhaswamy Spinning Mills P Ltd [2010 (3) TMI 860 - Madras High Court]. In view of the aforesaid decisions and CBDT Circular, we hold that the unabsorbed depreciation of earlier years from the eligible unit cannot be set off from the profits of the eligible unit entitled for deduction u/s 80IA of the Act in the years under appeal. We further hold that once the deduction u/s 80IA of the Act is claimed by the assessee from the ‘Initial Assessment Year’ (as chosen by it), then any loss incurred thereon would have to be set off against the profits of the said eligible unit in the subsequent years while claiming deduction u/s 80IA of the Act in subsequent years. Accordingly the additional ground raised by the assessee is allowed.
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